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The Associated Press March 18, 2010, 4:59PM ET

Governor signs Arizona budget-balancing bills

Arizona Gov. Jan Brewer on Thursday signed the next state budget into law, including spending cuts and other steps that will reduce government services while closing big revenue shortfalls resulting from the Great Recession.

Major spending cuts include $385 million from the state's Medicaid program by allowing coverage for 310,000 people to be eliminated in January if new federal funding doesn't cover that cost. An additional $218 million will be saved by reverting to half-day funding for kindergarten.

Brewer said she signed the 11 bills because the spending cuts and other budget provisions are necessary to "begin the Arizona comeback."

The bills and three ballot provisions being submitted to voters close the projected $2.6 billion deficit in the fiscal year beginning July 1 and the remaining $700 million of the current year's shortfall.

The Legislature completed action on the final piece of the package Tuesday.

Democratic lawmakers and advocates for education and social services said the reductions cut unnecessarily deep and that legislators should have increased state revenue by eliminating tax breaks and applying the sales tax to more transactions.

It wasn't a surprise that Brewer signed the bills because Republican legislative leaders modeled most of the package on her January budget proposal and then negotiated changes with her.

Ballot measures going to voters in November include one referendum to abolish the First Things First early childhood program and transfer its $325 million of tobacco-tax funding to the general fund. A second would allow the transfer of $123.5 million from a land-conservation fund to the general fund.

Also as part of the budget-balancing package, the state is holding a May 18 special election for voters to decide whether to raise the sales tax from 5.6 percent to 6.6 percent for three years to raise roughly $1 billion annually.

"With my signature on this budget, the first major step to recovery has been taken," Brewer said. "The next critical step is the successful step of Proposition 100."

Along with $100 million of spending cuts in the current fiscal year and $1.1 billion in the next one, the budget includes $862.4 million of additional spending cuts -- mostly in education -- that would automatically take effect if voters reject the sales tax increase.

There are no makeup provisions in the budget if voters reject the November ballot measures. That could force lawmakers to return for a lame-duck special session to plug the resulting hole in the budget.

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